What Happens When You Pay Off the First Mortgage But Still Have the Second?
Once you pay off your first mortgage, your second mortgage becomes the primary. After this happens, whoever your lender is for your second mortgage becomes the one who can sell your property if you default on your loan repayments. Of course, you can pay off both mortgages simultaneously, making two repayments each month, but usually, your first mortgage is still paid off first because of the loan terms.
Basics of a Second Mortgage
Having two mortgages is risky. Not only does it mean you have two repayments to make, but it also means you’ll be spending more money on your home. For example, even if you apply for a second mortgage five years into your current loan term, you could still spend 45 years paying off your home. However, once your first mortgage is
paid off, you may be able to refinance your second mortgage into something more favourable.
Second mortgages may have less favourable terms, higher interest rates, and fewer features than your first mortgage because lenders consider them high-risk. Therefore, you can refinance the secondary mortgage with either the same lender or a different lender once your primary mortgage is paid off. Refinancing your second mortgage may allow you to get a lower interest rate and better features and enable you to pay your loan off faster, saving you money.
Second mortgages are high-risk and complicated. If you have a second mortgage and are close to paying off your first one, consult with the experts at Mortgage House. We can walk you through what comes next, answer any questions you may have, and can even help you refinance if you want to.